Saturday, November 25, 2006

The GAP falls into it even deeper

There are lots of ways to know when you have too much money. Some people continue to buy the highest grade of drugs. Other buy expensive toys out of the Neiman-Marcus catalog. If you're a publicly traded company, you keep mismanaging a once-great brand by retaining the worst managers on the planet, figuring that you can afford to watch your company lose money and market share day in and day out.

Did someone mention the Gap?

This isn't the first time I raked the Gap over the coals, and judging by the latest news, this won't be the last. Managers come and managers go, and with each one comes the prediction that they'll be the one to turn things around.

They never do. Which is why matters at the Gap continue to worsen. In fact, as of November, 2006, the Gap posted nine consecutive quarters of sales drops. Not one. not four. But nine. Nine quarters. In a row. For the mathematically challenged, that's over two years of underperformance.

Retailer Gap Inc.'s woes continue: Profits dropped 11% in Q3 to $0.23/share ($189m), and it lowered its full-year guidance to $1.01-$1.06, down from $1.08-$1.12. Sales were unchanged at $3.86b, but same-store sales were down 5%. CEO Paul Pressler: "We are maniacally focused on our turnaround in the short run." But six months ago Pressler predicted Gap would by now already be headed up. This was Gap's ninth straight quarter of sales erosion, which has spurred rumors its board may fire Pressler. Some investors are positive, citing increased financial discipline and trendier clothing; others say the lack of concrete customer reaction proves Gap has missed the mark. The poor performance wasn't a surprise because Gap already warned two weeks ago. Gap shares were down $0.22 yesterday, and another $0.45 after-hours, to $19.35.

Hello? Investors are positive citing increased financial discipline? Who's kidding whom? Yet another case of Caretaker Manager Syndrome, where the caretaker manager promises to cut spending in order to increase profitability, but completely neglects building the brand.

Over the same nine quarters, Gap has consistently failed to nurture and grow its core brand, relying mainly on cost-cutting and quick-fix advertising. Ask anyone why they would shop at the Gap and - surprise! - nobody can tell you. Watch their latest television advertising and you can see that in their last, desperate attempt to become relevant to anyone who might be watching, Gap has joined the rank of Caretaker-Managed brands who descend into thirty seconds of hip-hop or rap, hoping that someone, somewhere will wander into one of their stores.

There is no reason to shop at the Gap. If there ever was a reason, it died long ago, some time after the management installed the revolving door for its executives. In what may have been a spark of hope, one or two of their long-time managers were shown the door, but that didn't fix anything. Because firing this person or blaming that one doesn't solve the Gap's main bleeding wound:

They have no brand strategy. And all the hip-hop, kitschy or oblique advertising in the world can't hide it.

Last week on CNBC, I put the public on notice that Wal-Mart was on its way to money-losing quarters -- just as I accurately predicted for McDonald's a few years back. This week, Wal-Mart confirmed my suspicions by publicly announcing its "disappointing sales" for November - which includes Black Friday, supposedly the biggest shopping day of the year.

Wal-Mart Stores, Inc. on Saturday said that U.S. same-store sales in November fell 0.1% from a year ago -- the retail giant's first monthly same-store sales drop since 1996.

The reason? Again, no brand strategy.

When people have no reasons to buy from you, they simply don't buy from you. And if they have no reason, it's because you didn't give them any. They can whine all they want, buy the truth is that Gap, Wal-Mart and tons of other retailers are headed for a big, big tumble. While you're at it, you may want to check out Sears, too. Of course their stock prices are holding up.

Monday, November 20, 2006

The Universal End of MySpace

If you're a regular reader of this blog, you know that it doesn't take a crystal ball to predict the demise - or at the very least, the steep plummet - of media darlings whose publicity flames out within a short time of their meteoric rise.

It wasn't too long ago - right here, in fact - that I argued the case for insanity with regards to Rupert Murdoch's $800+ million purchase of MySpace.com. As if that digital folly weren't enough, I had a good, long laugh when Google overpaid for YouTube.com by a full $1.6 billion.

The fact that these dopes not only paid, but actually overpaid for these acquisitions proves that P.T. Barnum was only half right: There's actually two suckers born every minute.

Okay, so let's say you disagree with me. Let's say that your drugs are better than mine and that you actually can envision a means by which MySpace and YouTube are truly worth that kind of money. Is there enough in that pipe to tell me, how either are going to generate real revenue once advertisers figure out there's no payout there?

As of this writing, the average internet clickthrough rate is about 1/4%. In case that doesn't display accurately, let me spell it out: one quarter of one percent. Which means that of at least 400 people have to see your ad before one even thinks about clicking on it. Who knows how many of those clickers actually make it to your site, let alone buy once they get there. You want real numbers? Between real humans and spiders, robots and "black PR," you're lucky if one in ten thousand viewers ever get to your site by clicking a banner.

Yet that's the only revenue plan that these so-called "community" sites are able to offer.

Now comes another huge, dark force that both MySpace and YouTube never counted on. A revenue drain so immense that it completely escaped both companies' frame of mind. A force so powerful that anyone with any real marketing or internet experience would have seen it from 200 gigabytes out:

Lawyers.

That's right, the biggest threat to these billion dollar bloat jobs is the good old, analog guy in the three piece suit, whacking them upside the head for really big bucks. This time out (and believe me, there will be more), the shysters are lining up on behalf of Universal Music. Claiming copyright infringement and downright ripping off of protected intellectual property, armies of attorneys are massing on the digital frontier, ready to invade cyberspace -- and they'll be taking no prisoners.

Of course, if Murdoch and Google had just put a little more thought into how Branded Community® really works, the lawyers never would have gotten out of the gate. For that matter, they never would have had to rely on dismal advertising schemes to generate revenue, either.

Did I mention that response rates in a Branded Community® generate between 4% and 6%? Or that they can build double opt-in users with 100% deliverable e-mails at the rate of 1,000 new members per week?

If the big boys truly wanted to build sustainable, revenue-generating, brand-building communities, they would have invested in true Branded Community® for all of their brands, a platform which has quietly been profitable since 1998 - without ever coming close to a lawsuit.

But then, real Branded Community® doesn't make headlines. It makes money. And that seems to be somewhat of a lost art online these days.

Friday, November 17, 2006

James Bond or James Brand?

Boy, they just don't make move matinee idols like they used to. For that matter, they don't make movies like they used to. If you ever want to know why so many movies are so bad, you simply must read William Goldman's Adventures in the Screen Trade, in which he predicts with pinpoint accuracy exactly when and why the movies of the future will be so awful.

Writing in the late 1970's Goldman (who penned such classics as Butch Cassidy and the Sundance Kid) laments the fate of real movies as studio control is gradually ceded by movie makers to their lawyers, agents and accountants. He recounts how in the future, the actual movie won't count for anything - it's the deal that matters.

Which picture makes money and which stars make money will drive production, driving down the quality and number of original movies. Instead, he argues, we'll see more sequels. More re-telling of the same stories, because research and receipts will dictate what kind of motion pictures will make the most money.

"There will be no more movies," he sighs, "only deals."

Keep in mind that Goldman wrote this decades ago, when the notion (let alone production) of sequels was relatively rare. Goldman's prediction was dead on. In the last few decades, it's been difficult to avoid sequels. Any movie that does reasonably well is assured of its sequel. Whether you're Sylvester Stallone or Arnold Schwartzenegger, a movie just ain't a movie unless there's a number at the end of its title.

Which brings us to James Bond.

Among the world's great debates is the question of who was the best actor to ever play the role. Most agree that Sean Connery was the ultimate Bond, although Roger Moore gets high marks, as well. In the latter day, politically-correct world (where M is actually female), the emasculated Pierce Brosnan gets votes (Sorry. He's just too effeminate for me. But that's another story).

The big story with the latest, blonde Bond isn't the plot. Or the new guy. Believe it or not, it's the product placement in the movie. No fewer than eight major brands have ponied up over $100 million in placement fees just to be featured as part of the Bond mystique.

What, exactly, do any of these brands hope to gain? Do they really think that the shadow of a once-great movie icon can pimp product simply through their products' on-screen cameo appearances? Even better, do they really think that there's anyone left on the planet who even wants to emulate James Bond?

Face it, if you tried any of the hi-jinx our man from the British Secret Service performs, the best you'd get is a stern reprimand from that old bat in your Human Resources department. Maybe with a few months of sensitivity training thrown in. So as far as mimicking matinee idols go, I don't see Sony or anyone else moving truckloads of product here.

In fact, all I see are gullible manufacturers paying mega-bucks and getting nothing in return. It's like Goldman said. There are no more movies. Just deals. And show business is, after all, a business.

Thursday, November 09, 2006

Apple Dumps the Smarmy Guy

You have to hand it to Apple. Most of the time, they do things right. But when they do things wrong, they admit it and mop up their mess. This time, they finally realized their misstep with their "Apple Guy versus PC Guy" campaign, the result of an ad agency gone out of control.

If you haven't seen the campaign, it pits an ad agency's idea of a "cool guy" against a bloated, Bill Gates-inspired buffoon in a variety of head-to-head performance situations. Predictably, the PC guy falls all over himself, while the Mac guy smugly savors his little victories.

I'm sure all kinds of empty-headed, iPod-toting Mac-addicts got a cheap thrill out of the public drubbing of PC's. Unfortunately, this bit of self-involved idolatry landed Apple where they least expected to be:

In the Bad Guy seat.

Yup, the numbers are in and it seems the campaign actually did more to alienate people from Mac and actually - get this - make them feel sorry for the poor PC schlub. It's no wonder, because this is typical of out-of-touch agencies and their continued disservice to their clients.

Apple's brand strategy, while never really being articulated, has always revolved around its users' refusal to be lumped in with the Lowest Common Denominator. In the beginning, Apples were the "computers for the rest of us." A few years ago, that strategy was extended by celebrating the virtues of "thinking different."

Nice. Dead on. Good messaging, because that's how Mac users perceive themselves. They not only see themselves as being the underdogs with a secret, they actually take pride in it. This, in a nutshell, is one reason why Apple is the brand that refuses to die.

Now they bring along a campaign that's 180 degrees opposite from that brand strategy. In that cheap-shot kind of easy pickin's style that only the smarmiest, Bill Mahr fans think is amusing, Apple's ad agency decided that maybe Apple could appeal to the Lowest Common Denominator. They decided that faux cool was enough to gain public acceptance.

What they got was a failed ad campaign, right in their face. Now the Apple Guy is getting dumped. Hopefully, so will Apple's ad agency.

Wal Mart's Christmas Pig

Proving once again that even a blind pig roots up a truffle once in a while, Wal Mart, which has the dubious distinction of being the largest retailer in world with no brand strategy, recently launched its holiday season with a pronounced good move:

They're bringing back Christmas.

Not that Christmas was ever really gone. It was almost sidelined by this country's obsession with political correctness. For years, everyone in America tiptoed around the fact that the vast majority of Americans were indeed Christians. For that matter, a third of the planet's population are fans of Jesus Christ. But that didn't slow down activist courts, attorneys and social activists demanding equal time for anyone whose seasonal holidays fell with a week of December 25.

Now comes Wal Mart, the store that seems to do everything wrong, with a Hail Mary shot across the bough of retail America, devoting real money and permanent ink to Christmas merchandise and store displays. The store that wishes it were Target (or anyone else) but refuses to develop its own brand strategy, finally scored with its amorphous audience by making it okay to stuff your stockings.

I doubt that it was the powerful performance of Passion of the Christ that moved this miracle. I believe it has a lot more to do with the winds of change currently sweeping across the country. In the past 24 hours, we've watched repudiated Republicans pack their bags as Democrats took their seats in not one, but both houses of Congress. Within minutes of that, the Secretary of Defense is on the next train out. Not too much sooner after that, the President himself is making friends with the very same people he associated with terrorism just a few days earlier.

Change is often fueled by anger. What the national elections showed us is that people are angry. Really angry. They're tired of being told to be sensitive. They're tired of repressing their own values. They're tired of the same 25 people featured as People magazines most beautiful.

What Americans want back is their freedom to be who and what they are. They no longer are willing to blindly follow the person who instills them with the most fear.

Most of all, they want Christmas back. And this time, they're going to find it where we'd least expect it: on the shelves of their local Wal Mart.